Colorado Gaming Supplier Regulatory Overview

The first Colorado casino opened its doors in October of 1991, after limited gaming was approved by voters in 1990. Casino expansions were then approved by voters through Amendment 50 on November 1, 2008. There are currently 40 casinos that operate in Colorado and are regulated by the Colorado Limited Gaming Control Commission ("Commission"). The Commission issues all licensure for casino vendors in the state of Colorado.

In 2009, Colorado casinos saw a total gross gaming revenue of $734.59 million. Casino operations employ over 8,800 people within the state.1

For suppliers and vendors of goods or services to casinos, there are two basic classifications of businesses that require licensure as Slot Machine Manufacturers or Distributors: Type 1 and Type 2. Both of these groups complete the same application process for licensure. In addition, each officer, director, executive with management decision-making authority over the business, or employee working at the casino site must file a Key Employee Application. Any person holding 5 percent or more stock or share in a licensed business must submit an Associated Person Application to the Colorado Department of Revenue, Division of Gaming ("Division").2

For licensing purposes, all applicants must be at least 21 years old, possess suitable character, and agree to follow all Colorado laws and rules regarding gaming.3 If an applicant fails to supply supplemental information or materials to the Division within five days of the request, the delay may be grounds for delaying consideration of the application.4

All applicants are advised to keep copies of all submitted materials, as these submitted materials become part of the Division's investigation file and are presumed confidential. The Division will only grant release of information back to an applicant upon a showing of compelling cause.5

Slot Machine Manufacturer or Distributor License

A Slot Machine Manufacturer or Distributor License is required for all businesses or individuals who manufacture or distribute approved slot machines, video poker machines, or component parts of slot or video machines.6 Manufacturers and distributors who solely produce cabinetry or tables for slot or video machines are not considered a slot machine manufacturer or distributor.7 There are two types of licenses: Type 1 and Type 2.

Type 1 applicants are a single person or an entity where the total number of officers, directors, general partners, and 5 percent or more stockholders or equity holders totals six or less people.8 In addition, all of these persons must reside in the state of Colorado.

Type 2 applicants are any person or entity that does not meet the qualifications of a Type 1 applicant.9

It should be noted that, in addition to the enumerated license requirements, the Commission may, at its discretion, place additional requirements or criteria on a license upon issuance.10

Duration

A Slot Machine Manufacturer or Distributor License is valid for two years.11

Application and Licensing Fees

Each applicant and associated business must complete the Colorado Business Gaming License Application. Applicants for a Slot Machine Manufacturer or Distributor License are required to submit both a licensing fee and a background investigation deposit with the application. Investigation deposit funds are used for the investigation and any remaining balance is returned to the applicant when the investigation is complete.12

If the investigation requires additional funding beyond the initial deposit, the Division will request an additional deposit from the applicant and, if payment is not received, the investigation will cease until the deposit has been made.13 Applicants must pay both the investigative deposit and licensing fee upon submission of the application. The cost of investigation by Colorado authorities is set at $63.00 per hour, subject to annual review, and the applicant is also responsible for incidental costs such as travel and lodging.14

Type 1 Applicant: an investigative deposit of $5,000 is required.15 The nonrefundable licensing fee for a Type 1 applicant is $3,000.16

Type 2 Applicant: an investigative deposit of $10,000 is required.17 The nonrefundable licensing fee for a Type 2 applicant is $6,000.18

Associated Businesses are not required to pay an application fee or a background investigation deposit.19

Required Documents and Information

The following is a list of documents that must be submitted with a Colorado Business Gaming License Application, if applicable:

1. Trade Name Registration;2. Certificate of Authority from the Colorado Secretary of State's Office;3. Certified Copy of Articles of Incorporation, including amendments;4. Articles of Organization, with amendments;5. Partnership Agreement, with amendments;6. Trust Agreement, with amendments;7. Annual or Bi-Annual Reports for past three years and meeting minutes from past 12 months (corporations only);8. Current UCC Report for all states where filed;9. If publicly traded, a recent shareholders list from the applicant's transfer agent for all shares of common and preferred stock;10. Business Tax Returns, past three years;11. Financial Statements, past three years;12. Minutes from Compliance Committee or Compliance Officer meetings, past 12 months;13. List of Operating or Investment Accounts;14. List of Outstanding Loans or Financial Obligations; and15. List of other jurisdictions where the applicant holds or has applied for a gaming license.20

In addition, each person required to file a Key and Associated Person License Application must submit the applications with the Colorado Business Gaming License Application.21 The Division may require the applicant to submit, in addition to the aforementioned items, additional documents or information upon request.

If the company is publicly traded, then the Commission requires specific charter language to be included in the company's chartering documents.22

License Renewal

Renewal applications for manufacturer/distributors, operators, or retail licensees must be received by the Division at least 120 days prior to the expiration of the current license.23 Failure to do so will result in the application's being considered "not timely submitted" to the Division.24 Licensing fees for renewal applications are the same as initial applications (Type 1: $4,000; Type 2: $6,000).

Key Persons and Associated Persons License

Each officer, director, executive with management decision-making authority over the business, or employee working at the casino site associated with a Colorado Business Gaming License applicant or licensee must file a Key Employee Application. Any stockholder holding 5 percent or more stock in a Colorado Gaming Business License applicant, or any officer or director who does not act as a Key Employee of an applicant business must file for an Associated Person License. A person who holds 5 percent or more in stock and acts as a Key Employee is considered an Associated Key. All three classifications of individuals complete the same application, the Key and Associated Persons Application.25

Duration

A Key Person License and an Associated Person License are valid for two years.26

Application and License Fee

Persons filing an initial Key Employee license application must pay a $250 fee.27 Associated Persons applicants that are submitting an application in connection with a Colorado Business Gaming License Application have no fee and are not required to make a background investigation deposit.28 However, if an applicant is submitting the application separate from an original business license application, then the applicant must pay a $1,000 background investigation deposit.29

Required Documents

The following documents must be submitted, if applicable, with the completed Key and Associated Persons License Application:

Applicants are also required to list the identity and contact information for at least six personal references who are not family, present employers, or employees.31 Detailed schedules regarding financial information, assets, and liabilities are included in the application and must be completed.32

License Renewal

Key Employees must submit renewal applications at least 30 days prior to expiration of their current license. Failure to do so will result in the application's being considered "not timely submitted" to the Division.33 Licensing fees for renewal licenses for key persons are $200.34 However, if a Key Employee license expires before renewal, then the Key Employee must pay the $250 initial application fee.35

Institutional Investors

Institutional investors who acquire more than 5 percent of voting-class securities in a publicly traded licensee or parent company of a licensed Slot Machine Manufacturer and Distributor must notify the Division within 10 days of the acquisition. Licensees are responsible for notifying individuals or entities of the need to notify the Division.36

Any institutional investor that acquires more than 15 percent of voting-class securities in a publicly traded licensee or parent company or a licensee must file with the Division for a finding of suitability within 45 days of the acquisition.37 When filing for a finding of suitability, the following factors and documents will be examined by the Commission:

1. Whether the applicant falls within the definition of an "institutional investor";2. A statement, under oath, that the voting securities are for investment purposes only;3. The name, address, social security number, and telephone number of the officers, directors, and individuals with direct control over the institutional investor's holdings;4. The name, address, telephone number, and tax identification or social security number of each person who has the power to direct or control the institutional investor's voting rights;5. A list of the institutional investor's affiliates;6. A list of securities held by the institutional investor within the past year with descriptions, their amount, and the date of acquisition and sale;7. A list of regulatory agencies to which the institutional investor regularly makes reports;8. A list of criminal sanctions within the past ten 10 years;9. A list of regulatory agency actions within the past five years;10. A list of officers or directors whose tenure with the institutional investor was ended within the past 12 months;11. A copy of any filing made under 16 U.S.C. § 18a regarding the acquisition or proposed acquisition of voting securities of the licensee or affiliated company; and12. Any additional information requested by the Division or the Board.38

Licensing Process

Interested persons must fully complete the applicable applications, include the required supporting documentation, and pay the required fees and background investigation deposits. Completed applications should be sent to the Division. After receipt, the Division will begin processing the application and conducting the required background checks.

During the background check, the Division will examine the background, personal history, financial associations, character, record, and reputation of the applicant, as well as persons associated with the applicant.39 Applicants may be required to meet with investigators for personal interviews regarding their suitability.

At the Division's discretion, the applicant may be required to submit evidence of a contract between the applicant and a casino operator.40 The Division may suggest or require changes to the language of the contract so that the contract conforms to Division rules and regulations so that a license may be issued.41 All parties to a contract with a gaming operator may be required to file additional background materials to the Division at the discretion of the Division.42

At any point during the investigative process, the applicant may request, in writing, to withdraw from the application process. The Division will grant, grant with prejudice, or deny such a request.43

Once the Division has made the decision whether to recommend approving or denying a license, an order will be issued. If the Division recommends a denial, there will be written reasons regarding the decision to deny that accompany the order.44 All recommendation orders are public records.45

Written notice will be sent to the applicant regarding the time and location when the order will be heard before the Commission and the applicant may attend the hearing. All applicants will be notified of the Commission's decision.46

Upon recognition that an applicant has met all the requirements of Colorado gaming laws and regulations, including payment of fees, the Commission will approve a license application.47 All licenses issued are nontransferrable and must be returned to the Commission within 10 days upon dissolution of the company.48

Temporary Suppliers License

The Commission, at its discretion, may issue a temporary license if the following criteria are met:

1. The applicant has indicated that it meets all the requirements of Colorado gaming laws and rules;2. The applicant does not present any danger to the public or to the reputation of gaming within the state;3. Further investigation is unlikely to uncover any derogatory information regarding the applicant; and4. The issuance of a temporary license is of economic necessity to the applicant and is just under the circumstances.49

Temporary licenses may be of a specific duration determined by the Commission and are subject to suspension, revocation, and other actions permitted regarding permanent licenses.50 A temporary license may be issued consecutively at the Commission's discretion.51 Applicants who receive a temporary license are still responsible for annual license fees submitted in connection with a permanent license.52

Disclosure and Reporting Requirements

Before Licensure

All information disclosed by the applicant in any application or materials sent to the Division is submitted under penalty of perjury.53 Any intentional misrepresentation or omission in materials submitted to the Division may be grounds for refusal of a license and/or criminal prosecution.54 At all times during the application process and beyond, the applicant or licensee has the burden of showing compliance with all applicable rules and regulations.55

The applicant must disclose in the license application the identity of the manager or agent of the applicant.56

Applicants who fail to disclose an arrest that occurred after the applicant was 18 years old will be denied a license.57

After Licensure

After licensure, the licensee must report any known or suspected violation of Colorado law or regulations regarding gaming.58 Any criminal charge, conviction, or arrest must be reported to the Commission within 10 days of the event (this rule, however, does not apply to minor traffic violations unless there is a charge of driving under the influence of drugs or alcohol).59

Any time a slot machine is moved to a different location, a licensed manufacturer or distributor must notify both the local Division office and the Lakewood Division office via forms provided by the Division.60 Also, any discovered method of cheating, including plans, devices, schemes, or equipment, must be reported to the Division no later than 14 days after discovery.61

A licensee must make available documents and information related to the gaming operation upon request of the Commission or law-enforcement agencies.62

If the licensee applies for a gaming permit in another jurisdiction, then the licensee must notify the Commission of the application.63 The Commission may request a copy of the application or other documents.64

If the licensee is a publicly traded company, then the company must submit copies to the Commission of all proxy statements, Forms 10-Q, 10-K, 8-K, 1-A, 10-SB, 10-KSB, 10-QSB, 13e-3, or 14D-9 within five days of filing with the Securities and Exchange Commission ("SEC").65 Publicly traded companies must also submit any material documents received from the SEC to the Commission.66 It should be noted that if any one person or entity acquires 5 percent or more of the company's stock, then that person or entity would be required to file as an Associated Person under the rules.

Reapplying after Denied a License

If a license application is voluntarily withdrawn from consideration by the applicant and the Division grants the withdrawal with prejudice, then the applicant must wait one year from the date of the withdrawal before reapplying.67

Exemptions

Those persons or businesses supplying goods or services other than approved slot machines, video poker machines, or component parts for slot or video machines do not have to register with the Division, although the Division has the authority to require licensing or information on any person conducting business or having an ownership or interest in a business that conducts business with a casino within the Division's jurisdiction.68